Serbia, What happens if carbon tax takes over?, News
As early as October, the European Union will start introducing a carbon tax on goods whose production emits a large amount of carbon dioxide.
It is a kind of taxation of an ecologically insufficiently perfected technology, and the whole principle is established as part of the fight to slow down climate change, the dominant cause of which, at least according to the most popular explanation in recent decades, is precisely the breakneck increase of this gas in the earth’s atmosphere.
In practice, this will mean that European importers will pay the prescribed tax when purchasing iron, aluminum or fertilizers from Serbia. Of course, the cost will be transferred to the Serbian exporter, so the new levy will also heavily burden the Serbian producer.
Gradual increase of levy
At least initially, the tax will be imposed only on goods whose production emits enormous amounts of CO2, i.e. iron, steel, aluminum, cement, plastic, fertilizer, but also electricity and hydrogen. Serbia is a considerable producer of these goods, so the metal industry accounts for 13 percent, plastics for 11 percent, minerals and fertilizers for about 6.5 percent of total Serbian exports, of which at least a third ends up in the EU.
That segment will be taxed, initially with 26 euros per ton of emitted carbon dioxide. The levy will increase in phases in order to reach 80 euros in 2034, which is what European factories have been paying for years.
In addition to the fight for a healthy environment, the introduction of the tax is also justified by preventing the eventual relocation of production from the Union to countries that do not have a similar burden, so their producers are at an advantage compared to European ones. The Union intends to prevent this unfair competition.
True, in the first three years, a special commission from Brussels will only keep records of how much carbon dioxide each imported item “has in its soul”. This is giving space to producers outside the Union, who export to the Old Continent, to improve technology, reduce emissions and thus avoid additional taxation.
Electricity as the biggest challenge
It is estimated that between six and nine percent of total Serbian exports would be burdened, while the expenditure on the new levy would amount to between 60 and 90 million euros per year. However, this is the beginning, the amount would be increased in phases until it reaches 80 euros per ton of emitted carbon dioxide, but taxation would also be extended to goods whose production emits a smaller amount of undesirable gas.
Later, the so-called indirect emission, i.e. the amount of CO2 from the preliminary stages in the production of goods exported to the Union, would also be taken into account. First of all, we mean the production of electricity used for the production of the item exported to the Union.
In fact, it can easily happen that the production of electricity, and later hydrogen, will be the one to which taxing will be applied the most. Especially when it comes to Serbia, where about 70 percent of electricity is obtained from low-quality lignite, where record emissions of carbon dioxide are emitted.
If Serbia does not change the structure of electricity production, and Europe remains consistent in the gradual expansion of the carbon tax, the calculation shows that the Serbian producer would pay 60 euros for each megawatt of electricity consumed.
However, there is also the possibility that the European Union does not tax Serbian exports at all. The prerequisite is that Serbia itself introduces similar levies on disputed producers, and the revenue would go to the domestic budget. The problem is that in that case all producers would be affected, including those who do not export to the Union, but the state can always direct some kind of subsidy to them from the collected money.
A test for national leadership
It is clear that in essence Brussels is pressuring all exporting countries to the Union to invest in “green technologies” and environmentally friendly programs. Especially when it comes to electricity. But, we are talking about large investment requirements that cost a lot and take a long time. Two and a half years, until the tax collection begins on January 1, 2026, is a short period and it seems that the conversation about the extension of the deadlines is the first thing that the Serbian state leadership should undertake.
Since Serbia does not have storage, while “green power plants” are expensive, it is clear that the state would have to borrow a large part of the investment capital. Unfortunately, we have entered a period of extremely high interest rates and it seems that the whole operation would be acceptable provided that the European investment banks approve favorable special purpose loans.
About two-thirds of Serbia’s exports go to the European Union, and it would not be easy to find a new market, nor could it happen overnight. Therefore, he must take care of the criteria and rules established by Brussels. On the other hand, one should also take care of one’s own economy, technologically still noticeably below the European level. In this sense, the carbon tax will be a major challenge for the Serbian government.
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